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CUT THE RIGHT STUFF

In challenging times, it's more important than ever for farmers to know their cost of production, “so they can tell where to concentrate for trimming expenses,” says Mike Duffy, Iowa State University Extension economist. “Too often in such times, the strategy is simply cutting back, but this can do more harm than good if cuts are made in the wrong area.”

Cost-cutting decisions should be dictated by return on investment, Duffy says: “The economic principle is spending a dollar just to the point where you have a dollar of return.”

Extension experts have identified many of these cost-saving ideas. In the coming months, Corn & Soybean Digest will bring you more tips from farmers and researchers to help you manage production costs.

Cost cutting is on Stuart Spader's mind, now more than ever. He's made quite a few cuts already, and it's hard to know where else to cut, he says.

The York County, NE, grower raises corn, seed corn and soybeans on irrigated silt loam soils in southeast Nebraska. He's a shareholder in a 2,500-sow farrowing unit and finishes market hogs, feeding most of his corn crop. He's feeling the squeeze from many months of thin or negative livestock margins, plus this year's tight row-crop budgets.

Spader keeps his fertilizer outlays low by applying swine manure. He's eliminated tillage, except for incorporating manure on corn ground. He boosts irrigation returns by using soil water sensors and maintains a 50-50 corn-soybean rotation and applies generic herbicides. He and a neighbor harvest together, maximizing their labor and machinery efficiency.

Barry Ward, Extension economist at Ohio State University, can sympathize. “Where to scrutinize first? These decisions are very complex,” he says, “and growers have to look at their whole system. If they cut on seed genetics and technology,” for example, “they may have higher herbicide and insecticide costs.”

One of the first places to sharpen your pencil is machinery cost. “We have to be careful not to be caught up in machinery or technology that may not give us a return on investment,” Ward says.

The same goes for some of the extra goodies that growers can afford in flush times, such as plant-health fungicide applications or “other non-traditional products that may boost yield a little,” he says. “But is it enough to pay?”

Another area where growers can look for savings is seed selection, Ward says. Consider whether the traits being offered are ones that will earn you a profit. For example, the Bt corn borer trait isn't usually economic in Ohio, where corn borer infestations are low, he says. If you can't find the elite seeds you want without buying traits you don't need, check out the regional seed companies, which may offer genetics “more targeted to a region or state,” he says.

Other cost-cutting suggestions from Ward include buying fuel and fertilizer in bulk, switching to generic herbicides, cutting soybean populations and sidedressing nitrogen.

Keep a close eye on fuel costs, too, Duffy suggests. That means “evaluating trips, keeping power units tuned and properly inflating tires.” And don't neglect soil testing, he adds, so you know which nutrients you really need.